Feasibility report -basic concepts with example

By SHRINIVAS B. KOREWAR (ROLL NO:5)

ABHIJEET B. BHOSALE(ROLL NO:14)

Feasibility Report

What is feasibility study?

• A feasibility study is an analysis of the viability of an idea through a disciplined and documented process of thinking through the idea from its logical beginning to its logical end.

• Feasibility study is carried out in order to assess the viability of a new project

• It is primary and most important thing in development of a project

Reasons to Do a Study

• Gives focus to the project.• Narrows the business alternatives.• Identifies new opportunities.• Identifies reasons not to proceed.• Provides valuable information for “go/no go” decision.• Increases probability of business success by identifying weaknesses

early.• Provides documentation that the idea was thoroughly investigated.

Types of feasibility• Operational feasibility

1. Useful for identifying operational problems to be solved, and their urgency

2. The “PIECES” frameworkP-Performance ,I-Information, E-economy , C-controlE-efficiency ,I-Information, S-services

Types of feasibility

• Market Feasibility

1. Determine facility needs.2. Suitability of production technology.3. Availability and suitable of site.4. Raw materials.5. Other inputs

Types of feasibility

• Financial/Economic Feasibility1. Estimate the total capital requirements.2. Estimate equity and credit needs.3. Budget expected costs and returns

• Organizational/Managerial Feasibility1. Business Structure2. Business Founders

• Environmental feasibility Environmental impact and their assessment

Types of feasibility• Legal feasibility

1. Is the project legally feasible?2. Legal requirements.

Feasibility report

• A feasibility report is the results of a feasibility study. This report details whether or not a project should be undertaken and the reasons for that decision.

• Report Content1. Introduction/Executive Summary2. Background 3. outline of project4. Methodology/method of analysis5. Overview of alternatives6. Conclusion7. Recommendation

Introduction/Executive summary

1. It state objective of the report and of the project2. It should refer terms of references3. Also it should state the constraints within which it has been

conducted4. Executive summary:

This should concise summary of the major recommendations of the report within 6 pages so that it quickly understood by senior executive

Background

• Some feasibility reports may require some background discussion

in order to make the rest of the report meaningful to readers. • Describe your proposed plan in sufficient detail state if it worked

elsewhere and how it was implemented

• Background on the Situation. For many feasibility reports, you'll need to discuss the problem, need, or opportunity that has brought about this report.

Outline of system

• Outline of system involves description of project • List type and quality of product(s) or service(s) to be marketed.• Outline the general business model (ie. how the business will make

money).• Include the technical processes, size, location, and kind of inputs.• Specify the time horizon from the time the project is initiated until it is

up and running at capacity.

Methodology• It involves discussion on method of analysis for feasibility study

• Return on Investment (ROI) analysis For comparing overall profitability

ROI = Estimated lifetime benefits - Estimated lifetime costs Estimated lifetime costs

orROI = Net Present value / Estimated lifetime costs

STRENGTHS WEAKNESS

MAINTAINING THESE STREGTHS

What can do for maintain these strengths?

OVERCOMING THESE WEAKNESS

What should I do to overcome these weakness?

OPPORTUNITIES THREATS

TAKING ADVANTAGE OF THESE OPPORTUNITIES

What can I do to take the advantage of these opportunities?

OVERCOMING THREATS

What can i do to overcome these threats?

SWOT Analysis :-

Overview of alternatives

• Possible alternatives• “Sticking with the current system” should always be studied as one

alternative• Different business processes for solving the problems• Different levels/types of computerization for the solutions

• Advantages and disadvantages of the alternatives

• The major possible alternatives should be discussed and compared using clearly defined criteria.

1. Estimate Equity and Credit Needs

• Identify alternative equity sources and capital availability Producers, Local Investors, Angel Investors, Venture Capitalists

• Identify and assess alternative credit sources. Banks, Government (direct loans or loan guarantees), Grants, Local and State Economic Development Incentives.

• Assess expected financing needs and alternative sources. Interest Rates, Terms, Conditions, Etc.

2. Cost and benefits evaluation

• It demonstrate how this proposal is feasible

• It involves discussion technological feasibility, economic practicality, social desirability, and ecological soundness

• Examples of benefits1. cost reductions2. error reductions3. increased throughput4. increased flexibility of operation5. improved operation6. better (e.g., more accurate) and more timely information.

• Types of costsDevelopment costs purchasing cost, Installation cost, operational

cost

Conclusion• The conclusions section of a feasibility is the restatement of the

conclusions you have already reached in the comparison sections. In this section, you restate the individual conclusions, for example, which model had the best price, which had the best battery function, and so on.

• It must untangle all the conflicting conclusions and somehow reach the final conclusion, which is the one that states which is the best choice

Recommendation

• The final section of feasibility reports states the recommendation.

• The recommendation section should echo the most important conclusions leading to the recommendation and then state the recommendation emphatically.

• the basis for that judgment has to be stated somewhere in the requirements section.

Structure of feasibility report

Example of feasibility report on Wastewater system

Feasibility Report Executive Summary

Includes principal / salient features of technical, financial and

administrative aspects of the project

Introductionproject genesis – how idea of project originated?

- whether fits in development plan? organization of study scope and status of report

Project area and need for the project(background) Project area

geographic, topographic, climatic, religious, cultural descriptions

Population pattern estimation and analyze growth rate estimate probable density of population

Economic and Social conditions present living standards of various groups identification of locations according to income levels housing conditions data on education, literacy, unemployment etc.

Available water resources• adequacy of surface and ground water w.r.t quantity and

quality • development of water resources• pollution problems

Existing water supply system • details (source, capacity, area served, hours of supply, • number of connections, rate etc.) of existing system

Existing drainage and solid waste systems Need for a project

• improvement, expansion• new• deficiencies of existing system

Proposed project (water supply scheme outline) Details of the project

rehabilitation of the existing facility construction of new facility alternative designs

selection of sources alternative layouts of rising mains alternative sites of WTP & ESRs

training schemes for O & M consultancy services needed

Components of project thoroughly described with necessary topo- maps location maps technical information engg. design & drawings

Implementation schedule (CPM/PERT) Cost Estimates

capital investment (for all components) recurring cost (annual)

Impact on the environment Institutional responsibilities (Identification of organizations)

approval funding implementation O & M

Financial planSource of fundInterest on loanRecurring expensesAnnual burden

ConclusionSummary of findings and results of FRReview of needRecommended alternative scope, coverage and componentsCapital cost and tentative financing planUrgency for implementation

RecommendationSpecify all action for completionMention of detailed investigation, data collection and operational studies

Thank you